Saturday, June 17, 2006

Some time over the weekend I will stick up a couple of explanatory charts which will point out precisely why the bounce this week was absolutely ineveitable... and why it ought to have arrived a day before it did. I'm not sure if that will be before or after I update the Model Portfolios - probably before.

Federal
Reserve Open Market Operations

The Fed's Open Market Operations desk
performed 1 repurchase operation - a $2.75billion, weekend
repurchase with $0.748billion in T-backed collateral undertaken at a
7.9 basis point discount to the Fed Funds Rate (FFR).

Major US Indices

The Dow Jones Industrial Average was
barely changed, close-to-close. The final net move for the session was
a lousy 0.64 points (0.01%), with the index finishing the week
at 11014.55 points. The intraday high of 11045.2 was hit during a
strange program-trade driven burst of wanton buying just before the
start of the last half-hour - a spurt which was given back in its
entirety in the lkast half -hour. Typical expiration shenanigans - it
is blatant, foreseeable and as corrupt as Dick Cheney... but none of
the supposed market overseers will ever do anything about it.

It was also a narrow-range session - pretty much to be
expected given the huge runup of the last couple of sessions (from low
to high, the Dow futures moved almost 400 points in less than 2
sessions): the session low today was 10984.13 (set just after 1:45
p.m.), so the entire day's trade took place in a 30-Dow-point range.

Within the blue-chip index, 15 stocks rose, the biggest
gainers being Hewlett Packard (HPQ,
+3.64% to $33.04) and United Technology (UTX,
+1.55% to $61.75), which accounted for 17 Dow points between them.
Losers in the Dow numbered 15 and were led by Home Depot (HD,
-1.23% to $36.91) and American Express (AXP,
-1.21% to $52.92), with these two stocks contributing -9 Dow points
worth of downward pressure on the index.
Volume traded was tilted in favour of the gainers by 387.4m shares to
212.6m.

It's not a surpsie that both the internals and the direction
of the Dow, are at odds with the broader indices. The Dow is the 'last
refuge of the scoundrels' when it comes to trying to paint the tape; it
is much more easily manipulated than the S&P, for the simple
reason that many of the Dow components are relatively illiquid when
everone gets on the same side.

The broader S&P500
declined 4.62 points (0.37%), ending the day at 1251.54. Within the
index, gainers numbered 131, while 335 S&P500 stocks fell for
the day. Volume was tilted 1.6:1 in favour of the losers with 1524.77
million units traded in the losers as compared with 942.45 million
traded in the winners .

Over at Times Square, the Nasdaq
Composite lost 14.2 points (0.66%), to close at 2129.95,
while larger-cap technology issues fared better with the Nasdaq100
losing 10.24 points (0.65%), to end at 1562.84 points. Within
the tech benchmark, gainers numbered 26, while 67 Nasdaq100 stocks fell
for the day. Volume was tilted 1.2:1 in favour of the losers with
547.24 million traded in the losers compared to 471.05 million in the
winners .

NYSE Volume was super-chunky, with 2.82
billion shares changing hands, while Nasdaq Volume was
super-chunky (over 2 bill), with 2.51 billion shares being shifted from
one online brokerage account to another (and back again, in all
likelihood).

Major Market Statistics

Index

Close

Gain(Loss)

%

Dow Jones Industrial Average

11014.55

-0.64

-0.01%

S&P500

1251.54

-4.62

-0.37%

Nasdaq Composite

2129.95

-14.2

-0.66%

Nasdaq100

1562.84

-10.24

-0.65%

NYSE Volume

2.82bn

-

-

Nasdaq Volume

2.51bn

-

-

Bellwethers

My 9-stock "bellwethers" group fell by
an average of 0.76%

General Electric (GE) -$0.18 (0.53%) to
$33.93;

Citigroup (C) -$0.32 (0.66%) to $48.36;

Wal Mart (WMT) -$0.35 (0.72%) to $48.31;

I.B.M. (IBM) -$0.61 (0.78%) to $77.95;

Intel (INTC) +$0.18 (0.99%) to $18.30;

Cisco Systems (CSCO) -$0.24 (1.19%) to
$19.98;

eBay (EBAY) -$0.46 (1.48%) to $30.28;

Fannie Mae (FNM) -$0.96 (1.99%) to
$47.25; and

Freddie Mac (FRE) -$0.26 (0.45%) to
$57.50.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2054 to 1193, for
a single-day A/D reading of -861; and Nasdaq losers exceeded gainers by
1994 to 1025. The 10-day moving average of the A/D line fell to -301.9
on the NYSE, while the 10dma of the Nasdaq A/D fell to -332.8.

On the NYSE declining volume was greater
than volume in advancing issues by 1932.8 to 873.7 million shares; On
the Nasdaq declining volume exceeded volume in advancing issues by
1687.6 to 815.4 million shares.

26 NYSE-listed stocks rose to new 52-week highs, and 103
posted fresh 52-week lows, while on the Nasdaq there were 53 stocks
that hit new 52-week highs, and 88 which fell to fresh 52-week lows.

Market Breadth Statistics

NYSE

Nasdaq

Advancers

1193

1025

Decliners

2054

1994

Advancing Volume (m)

873.65

815.4

Declining Volume (m)

1932.81

1687.61

New Highs

26

53

New Lows

103

88

Market Sentiment Statistics

Index

Close

Gain(Loss)

%

CBOE Volatility Index

17.25

1.35

8.49%

CBOE Nasdaq Volatility Index

21.69

2.22

11.4%

Equity Put-Call Ratio

0.71

-0.3

-29.7%

10-day PCR

0.87

-0.02

-2.05%

SPX-VIX Ratio

72.6

-6.45

-8.17%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year
Treasury bond rising 3.7 bps to 5.172%.

The middle of the yield curve was broadly lower: five year
yields rose to 5.098%, and ten-year yields rose to 5.128%.

Spreads between short-dated (2-yr)
Treasuries and high-grade corporate bonds of similar maturity profiles
were 0.0 bps tighter at 40.0 basis points; spreads between longer dated
Treasuries and their corporate AAA counterparts rose to 78.0 bps for
10-year AAA, and 105.0 bps for 20-years.

Credit spreads (spreads between corporate
bonds of the same maturity profile but different creditworthiness) were
mixed with the AAA-A spread on 20-years 0.0 bps looser at 27.0 basis
points and the 10-year AAA-A spread 1.0 bps tighter at 17.0 bps.

Treasury Yields

Index

Close

Gain(Loss)

%

UST 13wk (yld)

4.745

0.025

0.53%

UST 2Y (yld)

5.15

0.09

1.78%

UST 5Y (yld)

5.098

0.027

0.53%

UST 10Y (yld)

5.128

0.03

0.59%

UST 30Y (yld)

5.172

0.037

0.72%

The Banks Index lost 0.71 points (0.66%),
at 106.82; within the index,